Friday, February 05, 2010

After releasing one of the strongest quarters in years last month, Microsoft (MSFT - commentary - Trade Now) -- like several other stocks this earnings season -- has been sold off. With Thursday's selloff, the stock was down to around $28 after getting up close to $32 three weeks ago. Yet there are numerous reasons to go long Microsoft at these levels, especially considering what's going on in the rest of the market.

Microsoft has been the Rodney Dangerfield of large-cap stocks for a while now -- it gets no respect. It's hard to believe that this stock got down to below $15 less than a year ago at the March lows. Since then, it's up 82%. For those who've owned the stock over that time, they've also received a fat dividend (currently just under 2%), which will only go up considering that the company continues to throw off cash -- Microsoft had $34 billion in cash stockpiled as of the most recent quarter.

The argument last year -- and still an argument that Microsoft bears use now -- is that this is a stock that has no growth prospects. It reported its first decline in quarterly sales year over year in the third quarter of 2009. Its online services business has continued to lose money and is still nowhere compared with Google (GOOG - commentary - Trade Now) in search.

After releasing one of the strongest quarters in years last month, Microsoft (MSFT - commentary - Trade Now) -- like several other stocks this earnings season -- has been sold off. With Thursday's selloff, the stock was down to around $28 after getting up close to $32 three weeks ago. Yet there are numerous reasons to go long Microsoft at these levels, especially considering what's going on in the rest of the market.

Microsoft has been the Rodney Dangerfield of large-cap stocks for a while now -- it gets no respect. It's hard to believe that this stock got down to below $15 less than a year ago at the March lows. Since then, it's up 82%. For those who've owned the stock over that time, they've also received a fat dividend (currently just under 2%), which will only go up considering that the company continues to throw off cash -- Microsoft had $34 billion in cash stockpiled as of the most recent quarter.

The argument last year -- and still an argument that Microsoft bears use now -- is that this is a stock that has no growth prospects. It reported its first decline in quarterly sales year over year in the third quarter of 2009. Its online services business has continued to lose money and is still nowhere compared with Google (GOOG - commentary - Trade Now) in search.

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